VEEVA SYSTEMS INC

Operating expenses include research and development, sales and marketing, and general and administrative expenses. We expect operating expenses to increase in the near term, primarily due to employee compensation-related costs.

Research and Development

Research and development expenses for the three months ended April 30, 2025 increased $21 million, primarily due to an increase of $20 million in employee compensation-related costs, which was driven by increases in headcount, as well as salaries and benefits. The expansion of our headcount in research and development was to support development work for the products that we offer or may offer in the future.

We expect research and development expenses to increase in the near term, primarily due to employee compensation-related costs and hosting fees as we continue to invest in our product offerings.

Sales and Marketing

Sales and marketing expenses for the three months ended April 30, 2025 increased $1 million, primarily due to an increase of $3 million in employee compensation-related costs, driven by increases in salaries and benefits, partially offset by a decrease of $2 million in travel costs.

We expect sales and marketing expenses to increase in the near term, primarily due to employee compensation-related costs and the increase in marketing program costs related to events.

General and Administrative

General and administrative expenses for the three months ended April 30, 2025 increased $8 million, primarily due to an increase of $10 million in employee compensation-related costs, offset by a $5 million litigation settlement accrual that occurred in the quarter ended April 30, 2024. The increase in employee compensation-related costs was primarily driven by stock-based compensation related to the equity grant to our Chief Executive Officer in the quarter ended July 31, 2024.

Other Income, Net

Other income, net, for the three months ended April 30, 2025 increased $13 million primarily due to an increase in interest income from higher cash balances.

Provision for Income Taxes

The provision for income taxes differs from the tax computed at the U.S. federal statutory income tax rate primarily due to state taxes, tax credits, equity compensation, and foreign-derived intangible income deduction. Future tax rates could be affected by changes in tax laws and regulations or by rulings in tax related litigation, as may be applicable.

During the three months ended April 30, 2025, as compared to the same period in the prior fiscal year, our effective tax rate increased primarily due to the reduced future benefit from non-deductible compensation under IRC Section 162(m) and the reduced excess tax benefits related to equity compensation.